| DERIVATIVE FINANCIAL INSTRUMENTS |
NOTE 9 — DERIVATIVE FINANCIAL INSTRUMENTS At September 30, 2026, the Company had various costless collar and price call contracts open and in place to mitigate its exposure to oil and natural gas price volatility, each with an established price floor and ceiling. At September 30, 2026, the Company had natural gas basis differential swap contracts open and in place to mitigate its exposure to natural gas price volatility, with a specific term (calculation period), notional quantity (volume hedged) and fixed price. The Company had no open contracts associated with natural gas liquids prices at September 30, 2026. The following is a summary of the Company’s open costless collar contracts at September 30, 2026. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commodity | | Calculation Period | | Notional Quantity
(Bbl or MMBtu) | | Weighted Average Price Floor
($/Bbl or $/MMBtu) | | Weighted Average Price Ceiling
($/Bbl or $/MMBtu) | | Fair Value of
Asset
(Liability)
(thousands) | | Oil - WTI | | 10/01/2026 - 12/31/2026 | | 6,164,000 | | | $ | 52.75 | | | $ | 66.36 | | | $ | (134,423) | | | Oil - WTI | | 01/01/2027 - 12/31/2027 | | 3,650,000 | | | $ | 55.00 | | | $ | 76.00 | | | (30,811) | | | Natural Gas - Henry Hub | | 10/01/2026 - 12/31/2026 | | 13,800,000 | | | $ | 3.50 | | | $ | 6.70 | | | 6,347 | | | Total open costless collar contracts | | $ | (158,887) | |
The following is a summary of the Company’s open price call contracts at September 30, 2026. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commodity | | Calculation Period | | Notional Quantity (Bbl) | | Fixed Price
($/Bbl) | | Fair Value of
Asset
(Liability)
(thousands) | | Oil - WTI | | 10/01/26 - 12/31/2026 | | 6,118,000 | | | $ | 100.00 | | | $ | (20,884) | | | Total open price call contracts | | | | | | $ | (20,884) | |
The following is a summary of the Company’s open basis differential swap contracts at September 30, 2026. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commodity | | Calculation Period | | Notional Quantity (MMBtu) | | Fixed Price
($/MMBtu) | | Fair Value of
Asset
(Liability)
(thousands) | | Natural Gas Basis Differential - Waha | | 10/01/2026 - 12/31/2026 | | 13,800,000 | | | $ | (2.52) | | | $ | (17,816) | | | Natural Gas Basis Differential - Houston Ship Channel | | 10/01/2026 - 09/30/2029 | | 124,944,000 | | | $ | (0.37) | | | (6,104) | | | Total open basis differential swap contracts | | | | | | $ | (23,920) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The Company’s derivative financial instruments are subject to master netting arrangements, and the Company’s counterparties allow for cross-commodity master netting provided the settlement dates for the commodities are the same. The Company does not present different types of commodities with the same counterparty on a net basis in its interim unaudited condensed consolidated balance sheets. The following table presents the gross asset and liability fair values of the Company’s commodity price derivative financial instruments and the location of these balances in the interim unaudited condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025 (in thousands). | | | | | | | | | | | | | | | | | | | | | | | | Derivative Instruments | | Gross
amounts
recognized | | Gross amounts
netted in the condensed
consolidated
balance sheets | | Net amounts presented in the condensed
consolidated
balance sheets | | | | September 30, 2026 | | | | | | | | | | Current assets | | $ | 20,399 | | | $ | (13,584) | | | $ | 6,815 | | | | | Other assets | | 3,331 | | | (3,331) | | | — | | | | | Current liabilities | | (211,960) | | | 13,584 | | | (198,376) | | | | | Long-term liabilities | | (15,461) | | | 3,331 | | | (12,130) | | | | | Total | | $ | (203,691) | | | $ | — | | | $ | (203,691) | | | | | December 31, 2025 | | | | | | | | | | Current assets | | $ | 57,450 | | | $ | (23,398) | | | $ | 34,052 | | | | | | | | | | | | | | Current liabilities | | (23,398) | | | 23,398 | | | — | | | | | | | | | | | | | | Total | | $ | 34,052 | | | $ | — | | | $ | 34,052 | | | |
The following table summarizes the location and aggregate gain (loss) of all derivative financial instruments recorded in the interim unaudited condensed consolidated statements of operations for the periods presented (in thousands). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended
September 30, | | Nine Months Ended
September 30, | | Type of Instrument | | Location in Condensed Consolidated
Statement of Operations | | 2026 | | 2025 | | 2026 | | 2025 | | Derivative Instrument | | | | | | | | | | | | Oil | | Revenues: Realized loss on derivatives | | $ | (150,651) | | | $ | — | | | $ | (374,285) | | | $ | — | | | Natural Gas | | Revenues: Realized (loss) gain on derivatives | | (9,519) | | | 3,946 | | | 127,134 | | | 13,607 | | | | | | | | | | | | | | Realized (loss) gain on derivatives | | (160,170) | | | 3,946 | | | (247,151) | | | 13,607 | | | Oil | | Revenues: Unrealized loss on derivatives | | (60,189) | | | (4,372) | | | (186,837) | | | (2,790) | | | Natural Gas | | Revenues: Unrealized (loss) gain on derivatives | | (7,538) | | | 24,324 | | | (50,907) | | | (9,500) | | | | | | | | | | | | | | Unrealized (loss) gain on derivatives | | (67,727) | | | 19,952 | | | (237,744) | | | (12,290) | | | Total | | | | $ | (227,897) | | | $ | 23,898 | | | $ | (484,895) | | | $ | 1,317 | |
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